Friday 29 Mar 2024
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This article first appeared in The Edge Financial Daily, on April 21, 2016.

 

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KUALA LUMPUR: Just as the woes of Malaysia Airlines Bhd showed signs of receding, the national carrier hit an air pocket on Tuesday with the resignation of its chief executive officer (CEO) and managing director Christoph Mueller, throwing its RM6 billion turnaround plan into question.

For Malaysia Airlines, the abrupt departure of Mueller risks slowing down its plan to break even by 2018 after cutting staff, selling surplus aircraft, renegotiating its supplier contracts and dropping its unprofitable routes.

When contacted, Maybank Investment Bank Research aviation analyst Mohshin Aziz told The Edge Financial Daily that Mueller’s departure will “definitely complicate things”.

“It will make a lot of people in the airline feel uncomfortable as he leaves in the midst of a restructuring. [Since Malaysia Airlines started as a new entity on Sept 1 last year,] he has been at the forefront of the restructuring from the lay-offs, capacity and route cuts to forming new code-sharing pacts, and his past media interviews seemed to suggest that he was here for the long haul,” said Mohshin.

Mohshin also noted that the 53-year-old German aviation veteran’s abrupt exit, which comes two years prior to the expiry of his three-year contract, has raised concern over political interference in the running of the airline.

“Rumours are that Mueller and Malaysia Airlines’ parent Khazanah Nasional Bhd don’t see eye to eye on how to turn around the airline. I wouldn’t want to speculate on that, but such speculation is certainly not supportive of the airline’s future,” he said.

It doesn’t help that the reason for Mueller’s resignation was kept vague, of which Malaysia Airlines cited “changing personal circumstances”. It added that Mueller will serve a six-month notice period until September to facilitate an orderly transition.

While Mohshin is of the view that the airline has overcome several big hurdles since Mueller replaced Ahmad Jauhari Yahya as its managing director and CEO on May 1 last year, there are still plenty of challenges that his successor needs to tackle.

Earlier this month, Mueller was reported as saying that Malaysia Airlines, which had lost RM5 billion since 2011, posted a profit in February, and was on track to return to profitability by 2018.

However, with the current development, Mohshin said there is a risk that the said target would be delayed.

Still, he doesn’t expect Khazanah’s five-year 12-point MAS Recovery Plan (MRP) strategy to be derailed.

Aviation research firm Endau Analytics founder Shukor Yusof expects the MRP to “continue as planned given that Khazanah has already clearly and categorically outlined its targets”.

“Whoever comes in [as CEO in the future] has to follow [the MRP]. But it would be difficult to find his replacement now since Khazanah had previously described Mueller as the best candidate to lead the turnaround of MAS and to groom a local successor,” he told The Edge Financial Daily.

“Now even the turnaround specialist couldn’t take the heat,” he added.

TA Securities Research analyst Steve Tan Kam Meng believes that Mueller has done a good job so far, adding that the management style of his successor will be a crucial factor in shaping Malaysia Airlines into a profitable carrier.

Due to scant details, Tan said the impact on Malaysia Airlines’ turnaround plan will depend on who leads the airline next.

For MIDF Research analyst Tay Yow Ken, he believes Mueller’s departure should have little effect on Malaysia Airlines’ MRP. “Mueller has a six-month notice period until September to serve and thus, competition from Malaysia Airlines should remain status quo at least for the next six months.”

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